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EX-32.1 - GLOBAL FOOD TECHNOLOGIES, INC.v193461_ex32-1.htm
EX-31.2 - GLOBAL FOOD TECHNOLOGIES, INC.v193461_ex31-2.htm
EX-31.1 - GLOBAL FOOD TECHNOLOGIES, INC.v193461_ex31-1.htm

FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended    JUNE 30, 2010

¨ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

For the transition period from____________ to _____________

Commission file number   000-31385

GLOBAL FOOD TECHNOLOGIES, INC.
(Exact name of registrant as specified in charter)

Delaware
52-2257546
(State incorporation)
(IRS Employer
 
Identification No.)

113 Court Street,  Hanford,  California
93230
(Address of principal executive offices)
(zip code)

559-589-0100
(Issuer’s telephone number)

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes  x    No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  ¨    No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,  non-accelerated filer, or a smaller reporting company.
Large accelerated filer ¨   accelerated filer ¨  non accelerated filer ¨  smaller reporting company x

Indicate by check mark whether registrant is a shell company  Yes¨  Nox

Indicate the number of shares outstanding of each issuer’s classes of common equity, as of the last practicable date:
               Class               
Outstanding as of June 30, 2010
Common stock, par value $0.0001
29,833,667
 
 
 

 

GLOBAL FOOD TECHNOLOGIES, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2010

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION
3
   
ITEM 1.      FINANCIAL STATEMENTS
3
ITEM 2.      MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
15
ITEM 4. CONTROLS AND PROCEDURES
15
PART II - OTHER INFORMATION
15
   
ITEM 1.  LEGAL PROCEEDINGS
15
ITEM 1A.   RISK FACTORS
15
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
18
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES
18
ITEM 4.  RESERVED
18
ITEM 5.  OTHER INFORMATION
18
ITEM 6.  EXHIBITS
20

 
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PART I – FINANCIAL INFORMATION

ITEM 1.        FINANCIAL STATEMENTS

GLOBAL FOOD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS

   
June 30,
2010
(Unaudited)
   
December 31,
2009
 
ASSETS
           
Current Assets
           
  Cash
  $ 72,432     $ 22,135  
  Accounts receivable
    69,668       190,098  
  Inventory
    582,200       662,609  
  Prepaid expenses
    52,719       36,224  
  Total Current Assets
    777,019       911,066  
                 
Fixed Assets – net
    951,211       993,172  
                 
Other Asset
    26,089       26,089  
                 
TOTAL ASSETS
  $ 1,754,319     $ 1,930,327  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
                 
Current Liabilities
               
Accounts payable
  $ 635,895     $ 628,039  
Accrued liabilities
    881,413       514,388  
Notes payable – related parties
    640,000       640,000  
Note payable – others
    246,000       126,000  
Notes payable – trade and equipment
    967,000       812,000  
Total Current Liabilities
    3,370,308       2,720,427  
                 
Commitments and Contingencies
               
                 
Stockholders’ Deficit:
               
Preferred stock, $.0001 par value, 20,000,000 shares authorized, Series A and B , none issued and outstanding, Series C,  399,613 and 257,222 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    40       26  
Common stock, $.0001 par value, 100,000,000 shares authorized, 29,833,667 and 29,752,513 shares issued and outstanding at June 30, 2010 and December 31, 2009, respectively
    2,983       2,976  
Additional paid-in capital
    60,829,099       59,823,171  
Accumulated deficit
    (62,448,111 )     (60,616,273 )
Total Stockholders’ Deficit
    (1,615,989 )     (790,100 )
                 
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 1,754,319     $ 1,930,327  

See accompanying notes to condensed consolidated financial statements

 
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GLOBAL FOOD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
 
   
For the Three Months Ended 
June 30,
   
For the Six Months Ended
June 30,
 
   
2010
   
2009
   
2010
   
2009
 
                         
Revenues
  $ 314,476     $ -     $ 635,800     $ -  
Cost of goods sold
    314,332       -       645,396       -  
Gross profit (loss)
    144       -       (9,596 )     -  
                                 
Expenses
                               
Marketing
    354,572       399,931       633,985       709,761  
General and administrative
    302,178       496,603       719,678       887,290  
Research and development
    188,899       174,140       363,819       346,256  
Depreciation
    20,981       17,292       41,962       38,422  
Interest
    34,962       14,038       62.798       24,838  
Total Expenses
    901,592       1,102,004       1,822,242       2,006,567  
                                 
NET LOSS
  $ (901,448 )   $ (1,102,004 )   $ (1,831,838 )   $ (2,006,567 )
                                 
Loss per common share, basic and diluted
  $ (0.03 )   $ (0.04 )   $ (0.06 )   $ (0.07 )
                                 
Weighted average common shares outstanding, basic and diluted
    29,810,542       29,288,920       29,790,254       29,199,165  
 
See accompanying notes to condensed consolidated financial statements

 
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GLOBAL FOOD TECHNOLOGIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ DEFICIT
(Unaudited)

   
Preferred Stock
   
Common Stock
   
Additional
Paid-in
   
Accumulated
   
Total
Stockholders’
 
   
Shares
   
Amount
   
Shares
   
Amount
   
Capital
   
Deficit
   
Deficit
 
Balance, December 31, 2009
    257,222       26       29,752,513       2,976       59,823,171       (60,616,273 )     (790,100 )
Sales of common stock and warrants for cash
    -       -       12,125       1       54,562       -       54,563  
Sale of preferred stock for cash
    142,391       14       -       -       640,744       -       640,758  
Common stock issued for services
    -       -       69,029       6       310,622       -       310,628  
Net loss
    -       -       -       -       -       (1,831,838 )     (1,831,838 )
Balance, June 30, 2010
    399,613     $ 40       29,833,667     $ 2983     $ 60,829,099     $ (62,448,111 )   $ (1,615,989 )

See accompanying notes to condensed consolidated financial statements

 
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GLOBAL FOOD TECHNOLOGIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

   
For the Six Months Ended
June 30,
 
   
2010
   
2009
 
CASH FLOWS FROM OPERATING ACTIVITIES
           
Net loss
  $ (1,831,838 )   $ (2,006,567 )
Adjustments to reconcile net loss to net cash used in operating activities:
               
Depreciation
    41,962       38,422  
Stock issued for services
    310,628       227,273  
                 
Changes in operating assets and liabilities:
               
Accounts Receivable
    120,430       -  
Inventory
    80,409       (86,782 )
Prepaid expenses
    (16,495 )     (13,387 )
Other assets
    -       (300 )
Accounts payable and accrued liabilities
    374,880       (17,045 )
                 
Cash used in operating activities
    (920,024 )     (1,858,386 )
                 
CASH FLOWS FROM INVESTING ACTIVITIES
               
Acquisition of  fixed assets
    -       (146,956 )
                 
Net cash used in investing activities
    -       (146,956 )
                 
CASH FLOWS FROM FINANCING ACTIVITIES
               
Proceeds from notes payable
    275,000       250,000  
Sale of preferred stock
    640,758       1,000,000  
Sale of common stock
    54,563       690,820  
                 
Net cash provided by financing activities
    970,321       1,940,820  
                 
CHANGE IN CASH
    50,297       (64,525 )
                 
CASH – BEGINNING OF PERIOD
    22,135       278,443  
                 
CASH – END OF PERIOD
  $ 72,432     $ 213,918  
                 
SUPPLEMENTAL DISCLOSURES
               
Interest paid
  $ 48,200     $ 5,512  
Non-cash financing transactions:
               
Issuance of common stock for accrued liabilities
  $ -     $ 697,500  

See accompanying notes to condensed consolidated financial statements

 
6

 
 
GLOBAL FOOD TECHNOLOGIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2010

1. Description and nature of the business, organization and basis of presentation.

Global Food Technologies, Inc. (the “Company”, “we” or “us”) is a biotechnology company focused on the development of food safety processes for the food processing industry by using its proprietary scientific processes to make commercially packaged seafood safer for human consumption and to increase the shelf life of those products. The Company has developed a process using its developed technology called the “iPura™ Food Processing System”. The Company’s ability to generate revenue will depend, among other things, on its ability to demonstrate the merits of the iPura™ system as well as brand development and establishing alliances with suppliers and vendors.  The Company has generated modest revenues to date.

Unreviewed Interim Financial Statements

Our interim financial statements as of June 30, 2010 and for the three and six months then ended have not been reviewed by our independent registered public accounting firm as required by SEC rules and regulations. The required review of such financial statements could not be completed without incurring undue hardship and expense and the Company will file an amended Form 10-Q for this period once the required review is completed.

Going Concern

The accompanying financial statements have been prepared on the basis that the Company will continue as a going concern, which assumes the realization of assets and the satisfaction of liabilities in the normal course of business. Since inception, the Company has primarily been engaged in product development and pre-operational activities.  Sales began during the quarter ended September 30, 2009, however, only modest sales have been generated and the Company has never earned a profit. At June 30, 2010, the Company has accumulated losses totaling $62,448,111, negative working capital of $1,615,989, and negative cash flows from operations of $920,024 for the quarter ended June 30, 2010. The Company’s ability to continue as a going concern is predicated on its ability to raise additional capital, increase sales and margins, and ultimately achieve sustained profitable operations.  The uncertainty related to these conditions raises substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
 
Basis of presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America for interim financial information and pursuant to the rules and regulations of the United States Securities and Exchange Commission (“SEC”).  Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009, filed with the SEC on March 31, 2010.  The results of operations for interim periods are not necessarily indicative of the results expected for a full year or for any future period. The condensed balance sheet as of June 30, 2010 and any related disclosures have been derived from the December 31, 2009 audited financial statements filed in the Company’s 2009 Form 10-K.
 
 
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Accounting policies

Revenue Recognition
 
The Company recognizes revenues when all of the following conditions exist:  a) persuasive evidence of an arrangement exists; b) delivery has occurred or services have been rendered; c) the Company’s price to the buyer is fixed or determinable, and d) collectability is reasonably assured.  To date, all of the orders from our customers have met these criteria and therefore, the Company recognizes revenue when product is shipped to the customer.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Loss per common share

Loss per common share was computed using the weighted average number of shares of common stock outstanding during the period. Preferred stock, purchase options, and warrants were not used in the computation since their effect would be antidilutive.

Income taxes

The Company has no significant income tax expense or benefit for the periods presented due to its tax net operating loss carryforwards and related 100% deferred tax asset valuation allowance.

Inventory

Inventory is stated at the lower of cost (first-in, first-out) or market.  Market is determined by comparison with recent sales or net realizable value.

2. Inventory.

At June 30, 2010, inventory consists of frozen tilapia fish available for sale.  It is classified as finished goods and is recorded at delivered cost.

3. Trade and Equipment Financing Notes Payable.

As an alternative to commercial trade financing, leasing and factoring, we have instituted a program of issuing promissory notes, secured by inventory or iPura equipment systems, in series of maturities from one to three years with annual interest rates from 8.2% to 9.8%. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory or equipment. As is typical of trade financing, the proceeds of sale of inventory by the Company upon collection will be prorated and be used to repay the financing. Equipment financing debt will be paid at maturity from working capital derived from the commercial operation of the equipment. At June 30, 2010, the Company owed $815,000 in trade financing debt and $152,000 in equipment financing debt, for a total of $967,000.
 
 
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4.  Notes Payable - others.

In July 2009, a note for $126,000 was entered into with a third party, independent of the trade and equipment financing debt program. The note has a one year term, has been renewed and is due July 2011, bears interest of 5% and is convertible into common stock at the option of the lender at any time at a price of $4.50 per share. The third party loaned an additional $70,000 in March 2010 and an additional $50,000 in June 2010, on the same terms.

5. Notes Payable Related Parties.

On April 3, 2006, we arranged a 30 day bridge loan in the amount of $350,000 from a non-principal shareholder. The loan bears interest at eight percent (8%) per annum and is secured by all assets, including any intellectual assets, of the Company. Additional consideration included the issuance of warrants to purchase 35,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. The Company determined the fair value of the warrants to be $49,245 based upon the Black-Scholes option pricing model. In July 2006, $100,000 of principal was repaid. The remaining balance of $250,000 is due on demand. The loan is guaranteed by the President of the Company.
 
In April and May of 2006, we arranged for two loans aggregating $190,000 from a Director, Gary Nielsen, of the Company. The loans bear interest of 8%. Additional consideration for the loans was approved by the Board in August 2006, in the form of warrants to purchase 29,000 shares of our common stock. The warrants are exercisable at $4.50 per share for two (2) years from the date of repayment. The Company determined the fair value of the warrants to be $40,803 based upon the Black-Scholes option pricing model. In August 2006, we arranged for an additional loan, a six month bridge loan, for $100,000 from the Director bearing interest at 8%. The loan was renewed each subsequent maturity for an additional six months and now matures in November 2010 and is expected to be renewed. Such loans are unsecured.

In January and May 2008, additional loans of $100,000 each were borrowed from a Director, Gary Nielsen, with 12% annual interest rates.  The notes were for 30 and 60 days respectively and were repaid at their due dates.
 
In September 2009, a Director, Gary Nielsen, advanced $100,000 on a 30 day note bearing interest at 12% per annum. The note was not paid at maturity and continues in effect as a demand note.

6. Stockholders’ Deficit.

Preferred Stock Issuance.

In the three months ended June 30, 2010, we issued an additional 16,667 shares of Series C preferred stock and 33,333 warrants to purchase common stock in private placements for total proceeds of $75,000. All unit stock sales were at $4.50 per unit. All warrants are exercisable for three years at a price of the greater of $3.00 or 50% of the bid price on an approved public exchange or the most recent private offering price if there is no exchange.
 
 
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The Series C has preferential rights in liquidation over common stock at $4.50 per share and is convertible into common stock at a one to one conversion rate. There is mandatory conversion to common stock upon the earlier of certain events or five years. The Series C bears a dividend of 8% payable in cash upon declaration of the dividend by the Board of Directors and such accrued dividend shall be payable in cash only in the event working capital requirements permit.  Until such conditions are met, the dividends are not accrued. Each issued share is accompanied by two warrants to purchase common stock for a period of three years at an exercise price for the greater of $3.00 or 50% of the bid price on an approved public exchange or the most recent private offering price if there is no exchange. The cumulative, undeclared dividends were approximately $22,200 at June 30, 2010.

Common Stock Issuances.

We have been selling stock to fund operations since inception and expect to continue to sell stock to fund continued operations.

In the three months ended June 30, 2010, there were no sales of common stock for cash.

In the three months ended June 30, 2010, a total of 46,250 shares of common stock were issued for services received from consultants totaling $208,124.

Warrants.

There are 9,221,020 warrants outstanding as of June 30, 2010.

The above securities were issued under exemption from Regulation under either Regulation D or S promulgated by the Securities and Exchange Commission under the Securities Act of 1933.

ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Company Overview

Our iPura™ System is the physical on-site processing element of the iPura Food Safety Program, which combines various food safety elements described below. Our latest generation iPura™ System is designed to process seafood, with certain customization required for different types of seafood and the specific requirements of a given installation site.

In 2009, we completed the installation of our iPura™ System at a food processor located in China, Tongwei (Hainan) Aquatic Products Co., and began producing our first order of inventory and selling it in the United States.  We completed installation of another iPura™ System with a processor in Vietnam, Binh An Seafood Joint Stock Company, in early 2010, and expect production to begin at this facility by the end of the fourth quarter of 2010, subject to our ability to raise adequate capital and secure purchase orders.   We also have a contract for the installation of our iPura™ System with a seafood processor in Chile.  Although this system has been fabricated, it has not yet been delivered or installed.
 
 
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From the commencement of our research and development activities in 2001, we have raised substantial equity capital to fund the development of our iPura™ System. As of June 30, 2010, we have generated only modest revenues and since inception we have incurred accumulated losses totaling $62,448,111 and have negative cash flows from operations of $920,024 for the quarter ended June 30, 2010. Research on our first generation prototype was completed in 2004, and development and refinement on the commercial system design continued through 2005, especially adapting the system to processing salmon. Further development has resulted in a more efficient, less labor intensive and more easily maintained processing system.

The Company is executing its marketing strategy by promoting the iPura™ brand to food processors and industry associations as the world’s first food safety label. In 2008, we commenced limited marketing of the iPura™ brand to consumers.  The iPura™ seal is anchored with a descriptive and lasting slogan: The Highest Standard in Food Safety™”.

·   The science and marketing connect well with world food safety issues.
·   The iPura™ label is a tool which communicates that exceptional food safety measures have been taken to protect consumer health.
·   The label will serve to identify food products that have a higher level of safety and quality.
·   GFT has filed trade marks for its brand and slogan in every major food producing and food consuming nation.
·   Trade marks are expected to be listed on the primary registry at the USPTO and internationally, as a global trademark search by counsel found no prior marks or obstructions.

The iPura™ Food Safety Program is the constitution of the iPura™ food safety brand, which is anticipated to include:

·   An organic pathogenic and spoilage microorganism “kill step” prior to packaging.
·   Intelligent packaging of product.
·   Product traceability of handling and temperature.
·   An independent third party certification of standards.
·   A unique product insurance that follows the iPura™ labeled product throughout the distribution chain.
·   A distribution chain and consumer “pull through” marketing program promoting iPura™ as “The Highest Standard in Food Safety™.”

The iPura™ Food Safety Program is designed to help the food distribution chain grow their margins by increasing the quality, safety, and economic value of their products by reducing or eliminating the waste and liability associated with the distribution of contaminated food, and by increasing shelf life.

We plan to promote the iPuraTM brand utilizing a media and educational campaign focusing on the health and economic benefits of iPura treated products and the potentially increased profit margins available to the entire distribution chain. GFT has entered into a media-buying agreement with its strategic partner Global Media Fund LLC. We believe that this strategy will allow us to gain exposure through articles published in a large variety of newspapers, news, wire services, as well as possible radio spots, web placements and social media networks.   GFT’s marketing campaign will begin with “Ask your grocer for iPura™”. Food safety is public health news and we anticipate that the iPura™ food safety brand will be publicized as news in media across the globe.

During the next 12 months, we will continue limited marketing to consumers, as well as continuing marketing efforts to processors and industry associations to create awareness of our iPura™ brand. Due to capital constraints, direct marketing efforts to consumers have been limited, other than articles placed by Global Media Fund LLC.
 
 
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Processor and Distribution Agreements

We have executed contracts for the installation of our iPura™ Systems with four seafood processors, two in Vietnam, one in China and one in Chile.  The installations have been completed at the processor in China and with one of the processors in Vietnam.   All of the current agreements are structured pursuant to our “importer” model (see our Annual Report on Form 10-K for more details), with our wholly-owned subsidiary, iPura Food Distribution Company (IFD) responsible for ordering and purchasing the seafood from the processors, and then importing and distributing the seafood products to retailers or other distributors.  IFD has also signed agreements with the same four processors outlining the exclusive purchase terms.  As detailed below, as of June 30, 2010, we have only commenced processing seafood with one of these four processors.

Under these agreements, GFT is generally responsible for the cost of manufacturing, fabricating and installing the iPura™ System at the processors’ facilities, with the processors providing power and utility connections and certain other operating expenses.  Our iPura™ System would typically be installed onto one or two processing lines at the processors’ facilities.  Our iPura™ System will be operated and supervised by GFT personnel, at GFT’s expense.  Seafood processed through our iPura™ System will then be packaged and labeled with our iPura seal.  IFD has the exclusive rights to buy and distribute the seafood processed with our iPura™ System and the processors therefore cannot sell such seafood to any other customers or distributors, or otherwise use our iPura™ System for any other seafood processing. The agreements have terms that range from one to three years from the date of completion of the installation of our iPura™ System at the respective processor’s facility.  IFD has obtained most favored nations pricing with respect to seafood purchased under all of the agreements. None of the agreements have any minimum purchase requirements for IFD, although one agreement has a target volume schedule, with potential increases to the per pound seafood price if such targets are not met.

GFT has completed the China installation, and begun processing seafood at this facility, although in limited quantities to date.  Sales of seafood in the U.S. from this facility accounted for all of our sales to date. There is a second iPura™ System located at the processor in China that is available for future installation if sales levels require it. We have also completed installation of a larger iPura™ System with one processor in Vietnam.  This unit is not yet in production, although we expect it to be by the end of the fourth quarter of 2010.

We have received limited purchase orders to date for our products and continue negotiations with certain select U.S. grocery store retailers, including negotiations with regional and national retailers.  As discussed herein, we will need to obtain adequate financing in order to purchase the seafood from the processor and carry the seafood inventory costs until resold to a sub-distributor or retailer.

Liquidity and Capital Resources

Historically, our sole source of cash has been the sale of equity to investors.  Although we expect to generate increased revenue from sales of seafood processed on our iPura Systems within the next 12 months, any funds generated from such sales during the next 12 months are not expected to cover our operating expenses.
 
 
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Based on our cash balance as of June 30, 2010, we are in need of immediate additional financing to fund our current working capital requirements, including accounts payable.  Furthermore, we believe that we will need approximately $3 million to manufacture iPura Systems and cover operating expenses during the next 12 months, in addition to a line of creditor other financing to finance the inventory of iPura  product.  As an alternative to a traditional commercial bank line of credit, we have implemented a program, described below, to finance inventory.  The amount of capital required will vary depending on a variety of factors, many of which are beyond our control.  We cannot assure you that funds from our future operations or funds provided by our current financing activities will meet the requirements of our operations, and in that event, we will continue to seek additional sources of financing to maintain liquidity.  Any additional capital we raise may involve issuing additional shares of common stock or other equity securities, or obtaining debt financing. However, at this point, we have not specifically identified the type or sources of this funding.

As of June 30, 2010, we had debt other than trade indebtedness in the ordinary course of business in the form of short term loans of $640,000 from a Director and a shareholder due on demand and three one year notes from a third party in the amount of $246,000.  Currently, we do not have the ability or resources to repay such loans if a demand is made for repayment in full.
We have implemented a trade financing program for individual accredited investors as an alternative to traditional commercial inventory financing and factoring.  This financing program consists of issuing promissory notes, secured by inventory, in series of maturities from one to three years with annual interest rates from 8.2% to 9.8%. The funds are received and controlled by a third party custodian to be disbursed only for third party costs of inventory. As is typical of trade financing, the Company’s collected sales proceeds will be utilized to service this debt. At June 30, 2010, $815,000 in trade financing debt has been received.

In July 2009, we also implemented an equipment financing program based on the same structure as the trade finance program using short term notes secured by the installed iPura equipment located in Vietnam. At June 30, 2010, $152,000 in equipment financing debt has been received.

We are actively pursuing all potential financing options as we look to secure additional funds both to stabilize and to grow our business operations. Our management will review any financing options at their disposal, and will judge each potential source of funds on its individual merits. Since we have not located any commercial bank inventory financing, we are developing options for inventory debt financing with other private parties, as described in more detail above.  Successful inventory financing is a critical need in order for us to continue distributing our products and generating revenue.  We cannot assure you that we will be able to secure additional funds from debt or equity financing, as and when we need to, or if we can, that the terms of this financing will be favorable to us or our stockholders. We are exploring commercial and joint venture financing opportunities and relationships with potential processor/customers with sale and lease-back arrangements.

We believe that we have adequate plant capabilities and capacity and sufficient qualified personnel to achieve our planned operations over the next 12 months.  Historically, the fabrication of major components of our iPura System have been outsourced.  We will likely continue this practice, and may also elect to outsource the integration and installation of the units depending on the number of units installed and the logistics of a particular site. We will add non-technical support personnel as required to manage the increase in administrative activity.
 
 
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Results of Operations

Sales:

We began sales in July 2009, with sales of $343,179 recorded for the year ended December 31, 2009. In the first quarter ended March 31, 2010, sales were $321,324, of which 65% were to Safeway, Inc., a large national chain. In the second quarter ended June 30, 2010, sales were $314,476, of which 39% were to Safeway. The remaining sales were to regional grocery distributors that sell to independent grocery stores, food service distributors and restaurants in many regions throughout the country. We anticipate an increase in volume from these existing customers and additional sales to new chains and distributors as they respond to our marketing programs. Our gross profit on these limited sales for the first six months was a negative $9,596 or -1.5%. Whereas invoicing margins remained consistent from prior periods, increased warehousing and transportation costs included in cost of sales were not absorbed by the volume of sales activity. We anticipate that our gross margins will continue to be very small throughout the remainder of 2010, as we continue to roll out of products with extremely competitive, commodity-based pricing.  If we are successful in promoting our iPura brand and its benefits, we anticipate increasing our prices and gross profit margins in the future.

Expenses:

Our net loss for the quarter ended June 30, 2010 was $901,448 compared to $1,102,004 for the previous quarter ended June 30, 2009, a decrease of 18% due to fewer non cash expense charged to general and administrative expenses described below. For the six months ended June 30, 2010, net loss decreased 9% over the comparable 2009 six month period, from $2,006,567 to $1,831,838 for the same reason as the decrease in the three month periods.

The decreases in net loss between both the three and six months comparative periods are primarily attributable to decrease in General and Administrative expenses the result a general decrease in spending especially for legal and travel but also including a reduction of  non-cash charges to expense for issuance of equity securities. The overall decrease also includes an approximate 10% reduction in marketing expenses resulting from a reduction in print advertising and collateral materials between both the comparable periods. Research and Development expense remained fairly constant between both comparative periods, decreasing 5% between the six month periods, with no new programs being undertaken. Depreciation expense remained fairly constant, increasing 9% between the six month periods,  with only one iPura system having been installed and depreciated but will increase as additional systems are installed. Interest expense increased approximately 150% in both comparative periods reflecting the increase debt levels  and is expected to increase substantially as the trade finance and equipment finance debt facilities are expanded. The cash used in operations increased by approximately 50% from $1,858,386 to $920,024 between the six month periods ended June 30, 2009 and 2010, respectively, resulting from a substantial  increase in 2010 of accounts payable and accrued liabilities used to fund operations.

Off Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Customer and Supplier Concentration

Our revenue for the quarter ended June 30, 2010 was derived from a limited number of  customers, with approximately 39% of our total revenue attributable to one customer, Safeway, Inc.  We expect this customer concentration to continue in the short-term as we seek to expand our sales with Safeway, Inc, but anticipate that customer concentration will eventually begin to decline if we are able to expand our customer base and effectively market and brand iPura.

All of our inventory for the quarter ended June 30, 2010 was derived from one supplier at its processing plant in China.  As described above, subject to financial resources and obtaining purchase orders, we anticipate purchasing and processing additional inventory from another supplier located in Vietnam by the fourth quarter of 2010.   Therefore, we anticipate continued dependence upon a very small number of suppliers.  The future loss of any major customer or supplier could have a material adverse effect on our business, financial condition and results of operations.
 
 
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

A smaller reporting company is not required to provide the information required by this Item.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act) that are designed to ensure that information required to be disclosed in our periodic reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC, and that this information is accumulated and communicated to our management, including our principal executive/financial officer, to allow timely decisions regarding required disclosure.

Our management, with the participation and supervision of our Chief Executive Officer and Chief Financial Officer (“Certifying Officers”), evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply its judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Based upon that evaluation, our Certifying Officers concluded that as of the end of the period covered by this Quarterly Report, our disclosure controls and procedures were not effective.   Our primary material weakness has been due to our limited number of personnel and, therefore, segregation of duties.

Changes in Internal Control Over Financial Reporting
 
There was no change in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

We are not a party to any legal proceedings and, to our knowledge, no such proceedings are threatened or contemplated against us.

ITEM 1A.
RISK FACTORS

A smaller reporting company is not required to provide the information required by this Item. However, please note the following about Forward-Looking Statements and the following brief description of certain risks that could have a material, adverse impact on the Company and its operations.
 
 
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Cautionary Information Regarding “Forward-Looking Statements”
 
This Quarterly Report on Form 10-Q includes certain statements about us that may be deemed to be “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  These forward-looking statements relate to matters such as, among other things, product development and acceptance, our anticipated financial performance, business prospects, technological developments, new products, future distribution or license rights, international expansion, possible strategic alternatives, new business concepts, capital expenditures, consumer trends and similar matters.

Forward-looking statements necessarily involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievement expressed or implied by these forward-looking statements.  In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “intend,” “expect,” “anticipate,” “assume,” “hope,” “plan,” “believe,” “seek,” “estimate,” “predict,” “approximate,” “potential,” “continue” or the negative of these terms.  Statements including these words and variations of these words, and other similar expressions, are forward-looking statements.  Although we believe that the expectations reflected in our forward-looking statements are reasonable based upon our knowledge of our business, we cannot absolutely predict or guarantee any future results, levels of activity, performance or achievements.  Moreover, neither we nor any other person assumes responsibility for the accuracy and completeness of these statements.

We note that a variety of factors could cause our actual results and future experiences to differ materially from the anticipated results or other expectations expressed in these forward-looking statements. The risks and uncertainties that may affect our operations, performance, development and results include, but are not limited to, the following:

 
·
whether we will be able obtain additional financing to continue or expand operations and to finance inventory costs, and the terms on which we will be able to obtain this financing, if at all;
 
 
·
whether our initial system installation will perform as expected in commercial applications;
 
 
·
our ability to obtain any commercial financing to allow us to purchase seafood inventory for processing in our iPura™ System, and to obtain such financing in amounts required and on commercially reasonable terms;
 
 
·
our dependence on a small number of customers and suppliers;
 
 
·
our ability to negotiate contracts and purchase orders with distributors and retailers;
 
 
·
our ability to obtain brand related premium pricing to yield an acceptable sales margin;
 
 
·
risks related to inventory costs, shipping and handling and spoilage;
 
 
·
our ability to obtain one or more third-party manufacturers for our system components and other products;
 
 
·
the cost at which we will be able to have our system components and other products manufactured, if at all, and the time it will take to have our system components and other products manufactured;
 
 
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·
our ability to obtain all required components for our systems on a timely basis and at the prices we anticipate;
 
 
·
whether our systems and products are viewed as providing the benefits we claim and whether these benefits are marketable by any customers we may seek to obtain;
 
 
·
our ability to enter into additional contracts with food processors, the time it takes for us to enter into any of these contracts and the licensing or pricing models we are able to implement;
 
 
·
our systems and products performing in the manner we expect in customer applications and without any material modifications;
 
 
·
our ability to obtain all necessary governmental approvals for our systems and other products, including all required import-exporter licenses and permits;
 
 
·
whether the introduction of the iPura brand will succeed in creating preferences with the consuming public;
 
 
·
whether we will be able to apply our technology to products other than fish or use our technology in any other fields;
 
 
·
the pace at which we will utilize our existing working capital and whether our existing working capital will be sufficient for us to continue to develop our systems and products to the extent we anticipate;
 
 
·
our ability to protect our intellectual property and obtain and maintain patents and other protections for our intellectual property.
 
 
·
the possible impact from competing products or technologies;
 
 
·
possible reductions in consumer demand for fish and poultry, including as a result of  any outbreaks of disease, including avian flu, or negative reports regarding the health benefits of fish and poultry;
 
 
·
our ability to hire, train and retain a consistent supply of reliable and effective employees, both domestically and in any countries in which we might be able to install one of our processing system;
 
 
·
the risk of non-payment by, and/or insolvency or bankruptcy of, any of our future customers or others with indebtedness to us;
 
 
·
the costs of complying with applicable labor laws and requirements, including, without limitation, with respect to health care;
 
 
·
economic and political instability in foreign countries or restrictive actions by the governments of foreign countries in which we may seek to conduct our business or obtain customers;
 
 
·
changes in tax laws or the laws and regulations governing food processing and on income generated outside the United States;
 
 
·
general economic, business and social conditions in the United States and in foreign countries where we may conduct our business;
 
 
·
fluctuation in interest rates, insurance, shipping, energy, fuel and other business utilities in any countries in which we conduct business;
 
 
·
the stability of and fluctuations in currencies in which we conduct business;
 
 
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·
threats or acts of terrorism or war; strikes, work stoppages or slow downs by labor organizations in any countries in which we conduct business; and
 
 
·
natural or man-made disasters that could adversely impact the industries or countries in which we conduct business.
 
ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Sales of Unregistered Securities

During the period covered by this Quarterly Report, we issued the following securities, discussed below, which were not registered under the Securities Act of 1933.  We did not employ any form of general solicitation or advertising in connection with the offer and sale of the securities described below.  In addition, we believe the purchasers of the securities are “accredited investors” for the purpose of Rule 501 of the Securities Act.  For these reasons, among others, the offer and sale of the securities listed below were made in reliance on the exemption from registration provided by Section 4(2) of the Securities Act, Regulation D and/or Regulation S promulgated by the Securities and Exchange Commission under the Securities Act.

In the three months ended June 30, 2010, a total of 16,667 shares of preferred stock and 33,333 warrants to purchase common stock were issued in private placements for total proceeds of $75,000. All stock and unit sales were at $4.50 per share or unit. All warrants are exercisable for a three year term at a price of the greater of $3.00 or 50% of the bid price on an approved public exchange or the most recent private offering price if there is no exchange.

In the three months ended June 30, 2010, a total of 46,250 shares of common stock were issued for services to consultants. Related expense of approximately $208,124 was recorded as operating expenses in the quarter ended June 30, 2010.

Purchases of Equity Securities

We are required by the Securities Act of 1933 to disclose, in tabular format, any repurchases of our securities during this reporting period. We did not repurchase any of our securities during this reporting period, and accordingly, we have eliminated such table.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

During the three month period ended March 31, 2010, there were no material defaults in the payment of principal or interest, a sinking or purchase fund installment, or any other material default not cured within 30 days or with the consent of the lender, with respect to any of our indebtedness exceeding 5% of our total assets. However, as noted above under “Liquidity and Capital Resources” in Part I, Item 2, we have certain notes that are due upon demand, and we do not currently have the resources to repay such notes if demands for immediate payment in full were made.

ITEM 4.   RESERVED

ITEM 5.  OTHER INFORMATION

(a)       Information Required To Be Disclosed In A Report On Form 8-K, But Not Reported

None
 
 
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(b)       Item 407(c)(3) of Regulation S-K

During our fiscal quarter covered by this Quarterly Report on Form 10-Q, there have not been any material change to the procedures by which our security holders may recommend nominees to our Board of Directors.

 
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ITEM 6.  EXHIBITS

Exhibit
No.
 
Description
3.1 (1)
 
Certificate of Amendment to Certificate of Incorporation dated August 18, 2005.
     
3.2 (2)
 
Certificate of Amendment to Certificate of Incorporation dated September 15, 2005.
     
3.3 (3)
 
Restated Certificate of Incorporation dated October 18, 2005.
     
3.4 (3)
 
Second Amended and Restated Bylaws as of August 31, 2005.
     
3.5 (5)
 
Restated Certificate of Incorporation dated October 18, 2005
     
3.6 (5)
 
Second Amended and Restated Bylaws as of August 31, 2005
     
31.1*
 
Certification of Chief Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
31.2*
 
Certification of Chief Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
     
32.1‡
 
Certification of Chief Executive Officer and Chief Financial Officer pursuant to pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley  Act  of  2002

Filed herewith
‡ 
Furnished herewith

(1)
Filed on August 19, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.
(2)
Filed on October 6, 2005 as an exhibit to Global Food’s Report on Form 8-K and incorporated herein by reference.
(3)
Filed on November 23, 2005 as an exhibit to Global Food’s Report on Form 10-QSB and incorporated herein by reference.
(4)
Filed on December 11,2009, as an exhibit to our Report on Form 8-K and incorporated herein by reference
(5)
Filed on November 23, 2005, as an exhibit to our Form 10-QSB and incorporated herein by reference
 
 
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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 
GLOBAL FOOD TECHNOLOGIES, INC.
       
Dated:    August 12, 2010
 
By:
/s/ Keith Meeks
   
Keith Meeks, President and
   
Chief Executive Officer
   
(PRINCIPAL EXECUTIVE OFFICER)
       
Dated:    August 12, 2010
 
By:
/s/ Marshall F. Sparks
   
Marshall F. Sparks, Chief Financial Officer
   
(PRINCIPAL ACCOUNTING OFFICER)
 
 
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